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Budget 2026 extends the 5p fuel-duty cut to 1 July 2027 and makes the 55p business-mileage rate permanent. A higher rate for miles above 10,000 follows in April 2027.
Chancellor John Healey delivered the Budget on Wednesday 28 October 2026. Neither change alters every motorist’s bill straight away.
Fuel duty: an extension, not a new cut
The temporary 5p-per-litre cut now runs to 1 July 2027. HM Treasury’s policy costings describe it as a six-month extension from 1 January 2027, with the planned RPI increase deferred to the same date. Duty stays at 52.95p a litre instead of rising to 57.95p. The cut had been due to reverse in two steps, 3p on 1 January and 2p on 1 March.
On 1 July 2027 the 5p returns and duty is uprated by RPI on the same date.
Extending a reduction that already exists does not take another 5p off today’s pump price. It postpones the reversal. Drivers should not budget on an immediate extra saving.
Business mileage: two different dates
The approved rate for the first 10,000 business miles in a car or van rose from 45p to 55p. The government announced it in May 2026 and backdated it to 6 April 2026. The Budget makes it permanent.
For miles above 10,000 the rate is still 25p in the 2026/27 tax year, which ends on 5 April 2027. It rises to 35p on 6 April 2027. Do not use the 35p rate for calculations covering the current tax year.
Take someone driving 15,000 business miles in their own car. In 2026/27 they can be paid £6,750 tax-free: 10,000 miles at 55p plus 5,000 at 25p. From 6 April 2027 the same mileage is worth £7,250, with the extra 5,000 miles at 35p. Under the old 45p and 25p rates it was £5,750. That is £1,500 more tax-free allowance, worth up to £300 in tax saved at the basic rate.
What the rate means in practice
The approved rate is the most an employer can pay tax-free per mile. Employers do not have to pay it. Anything above it is taxable and must be reported through payroll or on a P11D. If an employer pays less, the employee can claim Mileage Allowance Relief on the difference. That is tax relief, not a cash payment from HMRC.
Ordinary commuting does not qualify unless temporary-workplace rules apply, and drivers need records of their business journeys. Self-employed drivers can use simplified expenses, which carry the same per-mile rates.
Check the figures against HMRC’s mileage guidance for your tax year before changing a mileage policy or making a claim.